Moore v. Moore
2015 S.C. LEXIS 343, 414 S.C. 490, 779 S.E.2d 533 (2015)
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Rule of Law:
Enterprise goodwill, which is the value of a business that is transferable and independent of any single individual’s personal efforts, is marital property subject to equitable division. Personal goodwill, which is dependent on an owner's future earnings and personal skills, is not marital property.
Facts:
- Whitney Moore (Wife), who had extensive retail and marketing experience, opened Candelabra, a high-end lighting and home furnishings store, in April 2001, shortly before marrying Arthur Moore, III (Husband).
- From its inception, Wife served as Candelabra's President, overseeing all operations, including product selection, merchandising, and financial management, and was recognized for her exceptional 'eye for design.'
- In 2005, Husband's outside sales position was eliminated, and he began working at Candelabra, though the court found his contributions were overstated and primarily consisted of ideas without consistent execution.
- Following the 2008 recession, the business shifted its focus to developing an e-commerce website, which eventually generated up to 80% of its sales.
- While Husband claimed credit for the website's success, the court found Wife's active management, product selection, and design of the website were the critical factors driving its growth.
- The parties' marriage deteriorated, marked by Husband's frequent rages, and they separated in March 2011.
- In May 2011, Wife, in her capacity as President and controlling shareholder, terminated Husband's employment from Candelabra.
Procedural Posture:
- Marital litigation commenced in the family court in June 2011.
- The family court issued a temporary order that prohibited Husband from any involvement in Candelabra's operations during the litigation.
- The family court granted the divorce, valued the business Candelabra as of June 30, 2012, at $2,960,000, and determined that 90% of the business's goodwill was enterprise goodwill includable in the marital estate.
- The family court ordered an equal division of the marital assets, gave Wife an option to purchase Husband's interest over five years, and ordered Wife to pay Husband $122,557 in expert witness fees.
- Both Husband and Wife appealed the family court's order, and the South Carolina Supreme Court certified the appeal for its review.
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Issue:
Is the enterprise goodwill of a closely held business a marital asset subject to equitable division in a divorce proceeding?
Opinions:
Majority - Justice Kittredge
Yes. Enterprise goodwill, which inheres in the business itself and is transferrable in the market, is marital property subject to equitable division. The court adopts the emerging majority approach, distinguishing enterprise goodwill from personal goodwill, which remains non-marital property. Personal goodwill is associated with an individual's reputation, knowledge, and skills and represents future earning capacity, which cannot be divided as a marital asset to avoid a 'double charge' if alimony is also considered. In contrast, enterprise goodwill is an asset of the business itself, established through factors like brand recognition, customer lists, and operational systems, and it would transfer to a buyer upon sale. The court reasons that including enterprise goodwill allows for a more equitable apportionment of the marital estate, even though it presents valuation challenges for family courts.
Analysis:
This decision establishes a significant new precedent in South Carolina family law by formally recognizing enterprise goodwill as divisible marital property for the first time. It moves the state in line with the majority of jurisdictions and provides a framework for lower courts to distinguish between personal and enterprise goodwill. The case will have a major impact on the valuation of businesses in divorce proceedings, requiring experts and judges to analyze factors like transferability, brand reputation, and the owner's personal role to separate the divisible business value from the non-divisible personal value. Future litigation will likely focus on applying the multi-factor test established here to different types of businesses.
